Cadogan Hit by Ukraine Competition, Regulation

Ukraine-focused Cadogan Petroleum suffered from regulatory delays in the first half of this year as its application to convert the Zagoryanska exploration licence into a production licence was not approved, it said August 29. It has however begun to reduce its exposure to Ukraine, buying licences in Italy. And it reported a loss of $0.009 per share, an improvement on the loss of $0.14/share in the same period last year.

Production operations have continued in the Debeslavetska, Cheremkhivska and Monastyretska licences and the average net production rate has increased by 24%, from 115 barrels of oil equivalent/day in H1 2016 to 143 boe/d in the current reporting period.

It said there was a disagreement between central and local authorities on the distribution of the royalties from Zagoryanska, which had also affected its application to convert Pirkovska exploration licences. As the latter was filed a year later there are still 17 months in which to secure approval.

Traded volumes of gas and trading margins shrank compared with H1 2016 owing to increased competition. Both revenues and margins have been negatively impacted  with the result that gas trading has not contributed to the company profit over the reporting period, it said.

As its first step to diversify, it bought 90% of the shares of Exploenergy, an Italian company which has filed the applications for two exploration licences located in the prolific Po Valley, in close proximity to existing gas fields. The sellers will receive a deferred cash consideration of €50,000 ($60,000) for each licence payable upon an award of the licences and will be carried for their 10% interest until first gas in each licence. The group received $1 million of VAT refunds over the reporting period as a result of  an application filed in March 2017.

William Powell